WASHINGTON D.C. – The U.S. Department of Education announced this month it will delay the involuntary collection of student loan debt from borrowers in default, a move impacting millions as the landscape of federal student loan programs undergoes rapid and often conflicting changes under the Trump administration. The pause comes as the Department finalizes new repayment plans, but leaves many borrowers in a state of uncertainty.
More than 5 million Americans were in default on their federal student loans as of September, according to the Department of Education. Millions more are at risk of falling behind on payments this year. The delay in collections, which include wage garnishment and the withholding of federal tax refunds, offers temporary relief, but does not address the underlying challenges borrowers face.
“Borrowers genuinely have difficulty paying their loans, and to then locate out the government is making them more expensive and eliminating some of the tools and resources that aid people pay them back is… it’s panic-inducing,” said Winston Berkman-Breen, chief counsel at Protect Borrowers, a debt advocacy group.
The recent shifts follow a period of fluctuating policies regarding student loan relief. The Biden administration’s SAVE (Saving on a Valuable Education) plan, designed to offer more flexible repayment options, has faced legal challenges and is now slated for termination following a ruling by the 8th Circuit Court of Appeals. Approximately 7.5 million borrowers are currently enrolled in the SAVE plan and will need to transition to alternative repayment options.
Kate Wood, an expert at NerdWallet, a personal finance company, emphasized the need for proactive action. “Seven and a half million borrowers currently enrolled in SAVE need to switch to another plan,” she said. The Department of Education is expected to provide guidance on the transition, but borrowers are advised to explore other options immediately.
Borrowers can apply for income-driven repayment plans, including Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment. These plans base monthly payments on a percentage of discretionary income, potentially offering lower payments than standard plans. However, processing times for these applications may be longer due to the influx of borrowers seeking alternatives.
The Public Service Loan Forgiveness (PSLF) program has also seen changes. The Trump administration announced plans to alter eligibility requirements for participating non-profit organizations, potentially disqualifying workers whose jobs are deemed to have a “substantial illegal purpose.” This policy, which is being challenged by 20 Democratic-led states, is scheduled to take effect in July. Critics argue the measure could be used as a tool for political retaliation.
Wood recommends that borrowers currently enrolled in PSLF continue making payments despite the uncertainty. “This is obviously something that is very stressful, very upsetting for a lot of people, but given that we don’t know exactly how this will be applied or how these terms will be defined, it’s not something you can plan for in advance right now,” she explained.
Changes also impact graduate students. The “Great and Beautiful Law” enacted under President Trump has limited the amount graduate students can borrow through federal loans. Previously, students could borrow up to the total cost of attendance. New rules differentiate between academic and professional degree programs, with varying loan limits. Students entering new programs after July 1 will be subject to these limits. Professional programs, such as pharmacy, dentistry, and law, have an annual borrowing limit of $50,000, with a total cap of $200,000. Other graduate programs, like nursing and physical therapy, are capped at $20,500 annually and $100,000 total.
Borrowers with existing student loan debt can also explore loan consolidation, combining multiple federal loans into a single loan with a fixed interest rate. The application is available on the studentaid.gov website. Consolidation is a one-time opportunity for each borrower.